FASB Updates Treatment of Troubled Debt Restructurings

FASB
on Tuesday issued an Accounting
Standards Update that
the board said improves financial reporting by creating greater
consistency in the way GAAP is applied for various types of debt
restructurings, which FASB’s chairman said have become more common
since the most recent recession.

FASB
said in a press release that ASU no. 2011-02, Receivables (Topic
310): A Creditor’s Determination of Whether a Restructuring is a
Troubled Debt Restructuring, clarifies which loan
modifications constitute troubled debt restructurings. It is
intended to assist creditors in determining whether a modification
of the terms of a receivable meets the criteria to be considered a
troubled debt restructuring, both for purposes of recording an
impairment loss and for disclosure of troubled debt restructurings.
(For previous JofA coverage, see “FASB Seeks Greater
Transparency, Consistency for Troubled Debt Restructurings.”)

“The
increase in loan modifications caused by the recent economic
downturn led investors, regulators and practitioners to ask the
board to clarify what types of modifications should be considered
troubled debt restructurings for accounting and disclosure
purposes,” FASB Chairman Leslie Seidman said in the press release.
“This update provides that guidance, resulting in greater
consistency and transparency in the reporting of these transactions.”

For
public companies, the new guidance is effective for interim and
annual periods beginning on or after June 15, 2011, and applies
retrospectively to restructurings occurring on or after the
beginning of the fiscal year of adoption. For nonpublic entities,
the amendments in the ASU are effective for annual periods ending on
or after Dec. 15, 2012, including interim periods within that annual
period. Early application is permitted.

TAX NEWS

President Barack Obama signed legislation that retroactively extended more than 50 expired tax provisions for 2014, allowing taxpayers to take advantage of a host of tax incentives during this filing season.

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